The new tech successes driving fund results include Activision Blizzard, Salesforce.com, Micron Technology and Lam Research

Ask most people to explain this year’s rally in technology stocks and funds, and they’ll respond with a four-letter word: FANG, the popular acronym for
Facebook,Amazon.com,Netflix
NFLX -2.29%
and Google (via the stock of its parent,
Alphabet
).

But it isn’t that simple.

Most of the tech funds with the best returns year to date do rely heavily on FANG, and on
Apple Inc.,
AAPL -1.92%
according to data from fund researchers Morningstar Inc.

More in Investing in Funds & ETFs

But the hottest tech stocks this year aren’t the FANGs—they are semiconductor stocks, videogame companies and purveyors of software tied to hot fields like cloud computing and manufacturing automation. And this changing of the guard, temporary or not, means at least one tech fund is outperforming not only the S&P 500 but the S&P Tech index, and without overweighting the FANGs. That’s good news for tech-fund investors who worry that FANG stocks have become overvalued.

The year’s top-performing actively managed tech fund through July 7, according to data from Morningstar, is
T. Rowe Price Global Technology
(PRGTX), which listed only an 11% allocation to FANG stocks for the first quarter. The T. Rowe fund’s shares have risen 28.7% so far this year, before dividends, thanks in part to positions in London-based telecom firm
Liberty Global
LBTYA -3.25%
and
Tesla,
TSLA -3.03%
the latter of which it recently sold. The S&P 500 and S&P Tech index, by contrast, have returned 8.3% and 17%, respectively.

The fund’s largest holding is cloud-computing leader
Salesforce.com,
CRM -1.47%
says manager
Josh Spencer.
The $4.8 billion fund has a small exposure to Amazon and just recently bought some Netflix, but for much of this year Alphabet was the only FANG stock in its top 10 holdings. It also has no Apple shares. As the global tech fund’s name implies, it has also put more than a quarter of its money to work outside the U.S.

The second- and third-best returns for actively managed tech funds to date, by contrast—in a virtual tie—are
Fidelity Advisor Technology Fund
(FATIX) and
Fidelity Select Technology
(FSPTX)—each of which each devotes more than a quarter of its portfolio to FANG shares and Apple. The Fidelity Advisor Technology fund posted a return of 27.7% through July 7, and Fidelity Select Technology posted a return of 27.68%. Both returns are before dividends.

Mr. Spencer says he isn’t down on FANG. He just thinks it isn’t the only interesting technology around. He is just as interested—and more interested, at current prices—in chips, in software for industrial automation, in videogaming and in cloud computing.

Fidelity’s two top tech funds also have bets outside the FANGs, including Tesla and large investments in chip companies and Asian web businesses such as
JD.com.
JD -6.53%
But Apple, Facebook and Alphabet are the top three holdings of Fidelity Advisor Technology, accounting for more than a quarter of the fund, according to SEC filings.

Indeed, many tech-fund managers still like the FANG companies: 70% of actively managed funds are overweight the four companies’ share of the S&P 500, and short interest in the FANGs has all but evaporated, says Bank of America Merrill Lynch strategist
Savita Subramanian.

But even after the recent selloff in tech stocks, Alphabet is trading at 28 times this year’s estimated earnings and Facebook at 30; never mind the stratospheric multiples Netflix and Amazon have long commanded. Through July 7, Facebook was up 32% for the year, Amazon 31%, Netflix 21% and Alphabet Class A shares 19%. Apple shares are up 24%.

But none of the FANGs, nor Apple, has climbed as much as the top 10 performers in the 69-stock S&P 500 Information Technology Index through July 7.

The new class of tech outperformers, of course, also face risk of overvaluation or missteps. But this year’s top 10 tech performers in the S&P Information Tech Index include videogame company
Activision Blizzard
ATVI -2.42%
(up more than 50%), semiconductor manufacturing equipment maker
Lam Research
LRCX -2.92%
(40%), chip maker
Micron Technology
MU -3.49%
(38%), and videogame-chip maker
Nvidia
NVDA -2.23%
(37%). The common theme is their ties to markets growing faster than the projected 3% to 3.5% rise in corporate tech spending, says
Scott Kessler,
director of equity research at CFRA Research.

Weight watching

For investors who want to be in the tech sector but are worried about being overweight in certain shares, there is also
Guggenheim S&P 500 Equal Weight Technology
ETF (RYT), which owns equal-weighted positions in each tech company in the S&P 500. (It also doesn’t own Netflix and Amazon, which are members of S&P’s Consumer Discretionary Index.) The $1.4 billion fund has scored a 16.4% return this year, according to ETF Database.

“It’s a little bit of the anti-Apple,” says
Bill Belden,
head of product development at Guggenheim. “When market leadership is narrow, there’s a reversion to the mean where equal-weight funds can benefit.’’

Mr. Mullaney is a writer in Maplewood, N.J. He can be reached at reports@wsj.com.

Appeared in the July 10, 2017, print edition as 'Tech Funds to Sink Your Teeth (Not FANGs) Into.'